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Consider the following statements about the income calculation methods 1. The method of measuring the aggregate value of spending that the firms receive for the final goods and services which they produce is called the expenditure method. 2. The method of measuring the sum total of all factor payments is called the income method. 3. The method of measuring the aggregate value of final goods and services produced by all the firms is called the product method. Which of the statements given above is/are correct?

Consider the following statements about the income calculation methods 1. The method of measuring the aggregate value of spending that the firms receive for the final goods and services which they produce is called the expenditure method. 2. The method of measuring the sum total of all factor payments is called the income method. 3. The method of measuring the aggregate value of final goods and services produced by all the firms is called the product method. Which of the statements given above is/are correct? Correct Answer 1, 2 and 3

The correct answer is 1, 2, and 3.

Key Points

Methods of Calculating National Income

  • National Income = Rent + Wages + Interest + Profit + Mixed-Income.
  • National Income = C + G + I + NX. Whereas, Purchase of consumer goods and services by residents and households (C), Government expenditure on goods and services (G), Business enterprises’ expenditure on capital goods and stocks (I), Net exports (exports-imports) (NX)
  • National Income = (NDPFC) + Net factor income from abroad.

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